More generic drug consolidation
The Chrysler takeover grabbed most of the headlines this week, but even more important may be the purchase by US-based Mylan Laboratories of the generics business is German company Merck KGaA. (Note that this Merck is not the same as the US pharmaceutical company Merck, which was split off from the German firm during World War I.)
The deal was for $6.6 billion. What is Mylan? It is one of the top generic drug makers in the world, a leader in a segment that is at the same time becoming dramatically more important and also more consolidated. The deal will triple the US firm's size as Merck KGaA and make it the #3 generics company in the world, after Israel's Teva and Swiss Novartis/Sandoz.
The segment is consolidating faster than the big patent drug sector (Big Pharma) thanks to its narrow margins. Since there's lots of competition for each drug offered, these companies have to have a full inventory of drugs available, making profits off a small margin on each sale. The consolidation also allows companies to cut costs by offshore manufacturing and simply more bulk. In addition, as Bloomberg ("Mylan Shares Fall as Investors Question Purchase of Merck Unit", 5/1/407) quotes one analyst as saying "The U.S. market is saturated, and buying Merck generics was what a company like Mylan has to do to survive.''
While no deal seems final these days until they change the signs on the building, Mylan looks like it beat out Israeli generics giant Teva along with other generics companies and private equity firms. The frenzy bid up the price very high, far too high, many speculate.
A Wall Street Journal story (" Mylan Is Now Big Generics Player After Deal for Unit of Merck KGaA", 5/14/07) quotes a Mylan exec as saying "It's like any other beachfront property. If you want it, something that unique, you're going to pay for it. Don't believe an asset like this will come up in a long, long, long time,"
The deal is the second-biggest generics buy ever, after Teva's 2006 acquisition of US- based Ivax for $7.6 billion. Mylan tried to buy US tidal King Laboratories in 2004 fro $4 billion, but was prevented by its own investors.
10:55:58 PM 
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